23 April 2026
The war in the Middle East is first and foremost a human tragedy, but it is also affecting markets in real time. Investors are re-evaluating the risk of disruption to supply, shipping routes and major Gulf energy , which is why oil prices are reacting sharply to each new headline. Even if the conflict does not broaden materially, the market is likely keep energy prices elevated for longer than before.
The practical effects are already visible. Some shipping has already been rerouted around the Cape of Good Hope, adding time, fuel cost and complexity to global trade. And if key oil facilities in the Gulf suffer meaningful damage, repair and full recovery could take years rather than months, keeping energy prices under pressure well beyond the immediate crisis.
The impact does not stop at fuel. Higher oil and gas prices raise fertiliser costs because gas is a key input in crop nutrients, while more expensive transport lifts costs across the agricultural chain. These knock‑on effects matter most for portfolios, as they eventually filter through to food prices.
The result is more than short-term volatility. Energy and food costs become less predictable, inflation is harder to bring down, and central banks become more cautious about cutting rates. The conflict also reinforces the broader shift towards energy security and supply-chain resilience.
A more contained outcome would still be less damaging than a broader regional war, but it would not remove the higher floor under energy prices. A deeper escalation would raise the odds of materially weaker growth and stickier inflation. Rather than trying to make a single geopolitical call, the practical question is how these pressures ripple through major asset classes, and what a resilient portfolio looks like in that world.
How this filters through to asset classes
Currencies: In periods of stress, the US dollar often strengthens. That can support offshore returns for South African investors in rand terms, but it can also tighten conditions for emerging markets and add pressure to imported inflation. For South Africa, this matters through oil, rerouted trade and higher agricultural input costs.
Equities: Returns are likely to become more uneven. Energy, defence, infrastructure and some defensive sectors may hold up better, while transport, consumer and trade-sensitive businesses may struggle with higher input costs, freight disruption and weaker demand. Persistently higher energy prices favour companies with pricing power, strong balance sheets and limited reliance on cheap funding.
Bonds: Bonds are useful again because yields are higher, but they are not a straightforward hedge against inflation shocks. If energy prices remain elevated because of route disruption, insurance costs or damaged infrastructure, bond yields may stay higher for longer and longer-duration bonds can struggle as they are more sensitive to inflation expectations and interest rate changes. High-quality government bonds can still help if growth weakens sharply, but rate cuts are likely to be slower and more conditional.
Real and commodities: Higher and less stable energy prices can support selected commodity producers and infrastructure linked to energy, transport and grid spending. But the same shock can hurt broader growth, which is why exposure should be selective rather than market-wide. Real can strengthen portfolio resilience, but they should complement diversified equity and bond exposure.
Portfolio construction
If energy and inflation are less predictable, the goal is not to forecast the next headline but to build a portfolio that can absorb shocks without forcing bad decisions.That starts with liquidity. Cash remains useful for short-term needs, but it is not a full strategy if inflation stays sticky. A stronger approach is a portfolio with a diversified global equity core, selective emerging-, high-quality bonds, some real , and enough liquidity to avoid forced selling during volatility.
For South African investors, the lesson is not to abandon local or rush offshore at any price. It is to balance attractive local income opportunities with offshore exposure that spreads currency, policy and growth risk across more markets. In a world shaped by recurring geopolitical shocks, structurally higher energy prices and pressure on food inflation, the most defensible route to better long-term results remains the same: diversification, quality and discipline.
